CATL falls 54% since June as taxes squeeze profit and customers move

Timeline

1. Apr 28: CATL sold $5 billion of new Hong Kong shares at a discount to fund its expansion abroad.
2. Jun 2: The shares hit their peak.
3. Jul 16: Beijing announced that batteries would lose their consumption-tax exemption from Sep 1, adding to an export-rebate cut already under way.
4. Sep 4–15: Li Auto agreed to invest in rival battery maker Sunwoda, and Xiaomi picked CALB and Sunwoda for its new battery. Rumored production cuts followed.
5. Oct 20–21: JPMorgan cut the Hong Kong shares to Neutral, then third-quarter profit fell short of forecasts (BofA Securities). The shares had their worst day since listing.

What’s driving it

Company-specific

CATL is earning less on each battery. Third-quarter revenue rose 58.6%, but net profit rose only 14.5% and fell from the second quarter. Gross margin dropped to 20.7%, its lowest since late 2022. Two policy changes hit: the battery export rebate was cut from 9% to 6% in April and ends on Jan 1, 2027, and an 11-year consumption-tax exemption ended on Sep 1, with the rate rising from 2% to 4% in September 2027. Management blamed product mix first, then the taxes, and is negotiating with customers over sharing the cost (CnEVPost). Analysts also point to low-priced energy-storage orders.

Customers are spreading their orders. Li Auto now builds its own battery packs, and its 2026 i6 switched cells from CATL to Sunwoda and CALB, per a regulatory filing. CATL’s share of China’s EV battery market slipped from 42.3% in July to 40.9% in September.

Sector and market

Battery peers and Chinese stocks fell too, but far less (see the comparison above). CATL fell about twice as much as BYD and five times as much as the Hang Seng index, so most of the drop reflects worries specific to CATL (our reading).

Where it could go from here

These are other people’s views, not ours.

What analysts and the market think

Analysts remain positive but are cutting numbers. Of 19 covering the Hong Kong shares, 17 rate them a buy and 2 a hold, with no sells; their average target, about HK$650, is roughly 80% above the latest price (Yahoo Finance data). But forecasts are coming down: Citi and BofA Securities each cut their 2026 profit estimates by about 9%, and brokers’ new 2026 forecasts cluster around CNY 86–90 billion.

JPMorgan is the notable dissenter. It cut the Hong Kong shares to Neutral with a HK$500 target before the results, warning that the new taxes, smaller export rebates and trade barriers could erode battery makers’ profits faster than expected (CnEVPost). At the other end, Goldman Sachs cut its target but kept CATL on its Conviction Buy list.

Is the valuation reasonable?

CATL’s main, Shenzhen-listed shares trade at about 13 times trailing earnings, near the bottom of their own history (about 30 times in 2025, per Sina Finance). On forward earnings, CATL trades in line with Chinese peers and far below Korean rivals, whose profits are depressed.

Has the long-term story changed?

The policy costs are phased, not one-off: the tax doubles in 2027 and the export rebate ends in January. Production is also moving abroad. CATL’s Hungarian plant (planned 100 GWh) began trial cell production in September, and a plant with Stellantis in Spain is under construction (Caixin, Chinese). Cells made abroad avoid China’s export-rebate cut and EU import duties on Chinese batteries.

Valuation of CATL compared with its history and peers

Company	P/E (fwd)	EV/EBITDA
CATL 3750.HK (Hong Kong shares)1	~13×	~7×
BYD 1211.HK2	~11×	~5×
CALB 3931.HK2	~5×	~11×
EVE Energy 300014.SZ	~10×	~14×
LG Energy Solution 373220.KS	~51×	~27×
Samsung SDI 006400.KS	~27×	~47×

The 3–5 year view for long-term investors

Again, these are other people’s forecasts, not ours.

• Brokers still expect profits to grow about 20% a year through 2028. Citi’s new forecasts go from CNY 86 billion in 2026 to CNY 122 billion in 2028; UBS sees about CNY 131 billion in 2028. The Yahoo Finance consensus has revenue rising about 19% in 2027.
• Forecasters expect industry demand to keep rising. The IEA expects EV battery deployment to reach almost 3 TWh by 2030, up from about 1.2 TWh in 2025. BloombergNEF expects EV battery demand to grow more slowly than it previously thought, as passenger EV sales weaken in some major markets, but it raised its 2025–2035 energy-storage battery demand outlook by 27%. CATL says 20–30% global demand growth in 2027 is achievable.
• CATL’s global EV battery share rose to 39.4% in January–August from 37.7% a year earlier, per SNE Research. Analysts point to its scale and cost, fast-charging and long-range cells (Shenxing, Qilin), a growing energy-storage business, and sodium-ion batteries, which it plans to mass-produce this year.
• The main risks are customers building or dual-sourcing batteries; a price war in an industry where the IEA expects substantial short-term overcapacity in China; the tax and rebate changes; US restrictions (CATL is on the Pentagon’s “Chinese military companies” list, which it disputes); scrutiny of Chinese plants in Europe; and new chemistries.

What would change the story

Carmakers agreeing to share the tax, steadier margins or a faster buyback (CNY 20–40 billion approved) would ease the pressure. The end of the export rebate, more carmakers moving to in-house or rival cells, or a deeper price war would add to it.

Our read

CATL is still the dominant, growing battery maker, but the stock was priced for more. The squeeze on profit per battery is real; the next two quarters will show how much CATL can pass on to carmakers.